Time to Hit the Eject Button?

Netflix, the video-rental titan, is facing bruising battles in Hollywood and on Wall Street. Why the short sellers may have it right.

Talk about a Feel-Good Movie. Shares of Netflix, the video-rental giant, have more than tripled this year as millions of Americans have discovered the joys of cheap and easy video rentals by mail. In the past few weeks, however, the show has started to resemble a stomach-churning thriller.

Studio executives have been slamming Netflix, suggesting they will soon be charging the company much more for rights to rent out movies. Short sellers have been pounding the table, citing not only rising costs but sharply increased...